Y376%20IPE:%20Oil%20Politics

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Y376 IPEOil Politics

• February 22, 2011

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World Energy Consumption, 1965-2005, in Terawatts
(TW)
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Projected Future Energy Use
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Top Consuming Countries, 1960-2005, in Million
Barrels per Day
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Addiction to Oil
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Figure 9-5. World Consumption of Petroleum,
1960-2005, in Millions of Barrels per Day
Source U.S. Department of Energy, Energy
Information Agency, International Energy Annual
(various years).
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OPEC Headquarters, Vienna
Sheik Ahmed Zaki Yamani
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Table 9-1. Members of OPEC
Country Membership
Algeria 1969
Angola 2007
Ecuador 1973-92, Rejoined 2008
Indonesia 1962, quit 2009
Iran 1960
Iraq 1960
Kuwait 1960
Libya 1962
Nigeria 1971
Qatar 1961
Saudi Arabia 1960
United Arab Emirates 1967
Venezuela 1960
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OPEC

• Organization of Oil Exporting Countries

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Major Crude Oil Reserves, 2006
Source Jean-Paul Rodrigue, Dept. of Economics
Geography, Hofstra University
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Figure 9-4. Production of Crude Petroleum by OPEC
Countries, 1970-2007, in Millions of Barrels per
Day
Source U.S. Department of Energy, Energy
Information Agency, International Energy Annual
(various years).
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Figure 9-7. OPEC and Non-OPEC Oil Production,
1970-2007, in Millions of Barrels per Day
Source Department of Energy, Energy Information
Agency, International Energy Annual (various
years).
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Non-OPEC Oil Production, 1900-2003
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Major Oil Routes Chokepoints, 2000
Bosphorus
Million barrels per day
Hormuz
Suez
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Malacca
Bab el-Mandab
Panama
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Middle East
North America
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Latin America
Africa
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Western Europe
Former Soviet Union
Pacific Asia
Source Jean-Paul Rodrigue, Dept. of Economics
Geography, Hofstra University
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Price of Oil, Nominal and Real 1861-2006, per
Barrel
Source Wikipedia.
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Oil Prices, 1987-2011
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Figure 9-14.U.S. Gasoline Prices in Current and
Constant 2007 Prices, 1919-2007, in Cents per
Gallon
Source Department of Energy, Energy Information
Agency, Short Term Energy Outlook, August 2008.
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Gasoline Prices in Pennies per Gallon, 1973-2010
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Non-OPEC Supply and Oil Prices
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Real Price of Oil and Major Disruptions in World
Oil Supply
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Figure 9-8. U.S. Production, Consumption, and
Imports of Crude Petroleum, 1949-2007, in
Millions of Barrels per Day
Source Department of Energy, Energy Information
Agency, International Energy Annual (various
years).
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Challenges to the Seven Sisters and the rise of
the cartel (OPEC)

• Oligopsony An oligopsony is a market form in
  which the number of buyers are small while the
  number of sellers in theory could be large.
• The Seven Sisters were also an oligopsony!
• A cartel is a group of formally independent
  producers whose goal it is to fix prices, to
  limit supply and to limit competition.
• OPEC was formed in 1960, but its effects were
  most dramatic in 1974.
• OPEC sought to counterbalance the Seven Sisters.
• Definitions from Wikipedia

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Seven Sisters Old and New
Old New
British Petroleum China National Petroleum (China)
Gulf Gazprom (Russia)
Royal Dutch Shell National Iranian Oil Company
Standard Oil of California (Socal/Chevron) Petrobras (Brazil)
Standard Oil of New Jersey (Esso/Exxon) PDVSA (Venezuela)
Standard Oil of New York (Mobil) Petronas (Malaysia)
Texaco Saudi Aramco (Saudi Arabia)
Chevron acquired Gulf in 1985 and Texaco in
2001 Exxon acquired Mobil in 1999 The old Seven
Sisters became the four Supermajors
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Conservation Measures Taken after the Oil Price
Shocks of the 1970s

• Higher taxes on gasoline and fuel oil in Western
  Europe
• Fuel efficiency standards for motor vehicles in
  the US
• Accelerated adoption of energy-efficient heating
  for homes, offices, and factories
• General substitution of energy-conserving
  technologies for energy-intensive technologies

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Oil Prices have less impact on US Economy
This doesnt mean the US is consuming less oil,
just that it is more efficient at utilizing oil
to produce
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What Role Did Energy Politics Play in September
11? In

• Afghanistan
• Central Asia
• The Middle East
• The Rest of the World

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Afghanistan

• Afghanistan itself has few exportable energy
  resources.
• Its main value from an energy standpoint stems
  from the fact that it offers a route for Caspian
  energy to the sea via Pakistan.

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• There are large deposits of oil and natural
  gas in the Caspian Sea region.
• The main problem is getting these resources to
  markets.
• Pipelines are required to service the large
  markets in North America, Europe, and E. Asia.

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Two Pipelines in Greater Detail
Main participants in these two pipelines Tengiz
to Novorossiysk Russian Federation
24 Repub. Of Kazakhstan 19 Sultanate of Oman
7 Chevron
15 LUKARCO 12.5 Rosneft/Shell
7.5 Mobil
7.5 Agip
2 Turkmenistan to Pakistan Unocal, Gazprom,
Hyundai, Itochu, Delta Oil (Saudi Arabia)
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What is the Role of Saudi Arabia within OPEC?

• It is the largest single supplier of oil.
• The small Saudi population permits them the
  luxury of varying the amount of oil that they
  sell (thereby controlling prices)
• When they want the price to increase they sell
  less
• When they want the price to decrease they sell
  more

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Figure 9-10. Saudi Export Revenues and Foreign
Currency Reserves, 1960-2005, in Billions of
Current Dollars
Source World Development Indicators 2007 and
Saudi Arabian Monetary Agency, Annual Report,
Monetary and Banking Statistics.
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What Role Did Energy Politics Play in September
11? In

• Afghanistan
• Central Asia
• The Middle East
• The Rest of the World

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Afghanistan

• Afghanistan itself has few exportable energy
  resources.
• Its main value from an energy standpoint stems
  from the fact that it offers a route for Caspian
  energy to the sea via Pakistan.

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• There are large deposits of oil and natural
  gas in the Caspian Sea region.
• The main problem is getting these resources to
  markets.
• Pipelines are required to service the large
  markets in North America, Europe, and E. Asia.

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Two Pipelines in Greater Detail
Main participants in these two pipelines Tengiz
to Novorossiysk Russian Federation
24 Repub. Of Kazakhstan 19 Sultanate of Oman
7 Chevron
15 LUKARCO 12.5 Rosneft/Shell
7.5 Mobil
7.5 Agip
2 Turkmenistan to Pakistan Unocal, Gazprom,
Hyundai, Itochu, Delta Oil (Saudi Arabia)
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What is the Role of Saudi Arabia within OPEC?

• It is the largest single supplier of oil.
• The small Saudi population permits them the
  luxury of varying the amount of oil that they
  sell (thereby controlling prices)
• When they want the price to increase they sell
  less
• When they want the price to decrease they sell
  more

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Figure 9-10. Saudi Export Revenues and Foreign
Currency Reserves, 1960-2005, in Billions of
Current Dollars
Source World Development Indicators 2007 and
Saudi Arabian Monetary Agency, Annual Report,
Monetary and Banking Statistics.
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This Puts the United States in a Strange Position

• The U.S. wants the price of oil to be low, and it
  views the Saudis as a moderates within OPEC.
• Saudi Arabian donors funded the Mujaheddin in
  Afghanistan and many of the Islamic schools that
  were the recruiting grounds for both Taliban and
  Al Qaeda fighters.

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The Three Periods
Period Dates Type of Governance
Bretton Woods 1945-1971 Hegemonic
Interdependence 1971-1989 Collective
Globalization 1989-present Global
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Evolution of Subsystems
Subsystems Bretton Woods Interdependence Globalization
North-North Creation of US-dominated regimes Floating replaces fixed exchange-rates Major challenges to US hegemony EU expansion and the creation of Euro the US reemerges as hegemonic
North-South Bipolar competition NIEO, OPEC, increasing gaps w/in the South Rise of Asian NICs and the Washington Consensus
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What Happens to Specific Regimes?
Regimes Bretton Woods Interdependence Globalization
Monetary Fixed but adjustable rates Dirty Float Dirty Float greater concerns about crises
Trade GATT GATT challenged (even by US) WTO rise of the anti-globalization movement
Investment Few rules other than retaliation Period of nationalizations TRIMs within the WTO but MAI fails rise of BITs